Five-Dimension Adjacency Test
Measure strategic risk by counting how far an initiative moves from the core
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 95%
First define the core business through five dimensions: customer, channel or market, geography, business model, and product. Compare a proposed acquisition or growth initiative with that core and count how many dimensions materially change. A one-step adjacency may involve selling a nearby product through an established channel, while a four-step adjacency could introduce a new product, customer, sales motion, and revenue model simultaneously. Each additional step raises execution risk because the company has fewer relevant capabilities and advantages. Distant adjacencies are not automatically wrong, but they must offer enough strategic upside, market leadership, momentum, or acquired capability to justify the lower probability of success. The test also guides acquisition type: close-to-core gaps may suit technology-and-talent deals, while distant moves generally require proven businesses and stronger operating foundations.
Origin
Barada adapted Bain's Profit from the Core analysis to evaluate acquisition risk and strategic distance inside large technology companies.
Core principles
- 01A company's core is defined by more than its product
- 02Every changed business dimension adds execution risk
- 03Multi-step adjacencies require proportionally larger rewards
- 04Acquisition categories should follow strategy rather than drive it
How to run it
- 1
Define the core
Describe the company's primary customer, channel or market, geography, business model, and product. Focus on the business that produces the most durable profits and strategic advantage.
Pro tip Write one unambiguous sentence for each dimension before discussing a target.
Watch out A vague definition of the core makes every opportunity appear adjacent.
- 2
Map the proposed move
Describe the target or initiative using the same five dimensions. Compare each dimension directly with the core.
Pro tip Separate genuinely new capabilities from superficial differences in branding or packaging.
Watch out Do not treat a familiar technology as proof that the go-to-market model is familiar.
- 3
Count adjacency steps
Assign one step for each dimension that materially changes. Use the total as a directional measure of execution risk rather than a mechanically precise score.
Pro tip Record disagreements about whether a dimension changes; they often reveal hidden assumptions.
Watch out Do not manipulate definitions to force a strategically distant move into a low-risk category.
- 4
Identify capability gaps
For every changed dimension, list the capabilities, systems, talent, and operating knowledge required to succeed. Determine which capabilities the acquisition supplies and which still must be built.
Pro tip Pay special attention to difficult assets such as mature enterprise sales channels.
Watch out Owning a product does not automatically confer the ability to distribute or monetize it.
- 5
Match evidence to risk
Require progressively stronger evidence as the number of adjacency steps increases. Market leadership, revenue momentum, and an experienced team can make a distant move more defensible.
Pro tip Use proven scale to offset uncertainty when making a multi-step bet.
Watch out Large theoretical markets do not compensate for weak execution evidence.
- 6
Choose or reject the move
Proceed when the potential value and acquired capabilities justify the strategic distance. Otherwise reject the opportunity as undisciplined diversification or redesign it as a closer adjacency.
Pro tip Look for sequencing options that turn one large leap into several controlled moves.
Watch out Avoid rejecting every distant opportunity; some transformative strategies necessarily cross several dimensions.
In the wild
Barada describes Adobe's Omniture acquisition as a multi-step adjacency involving a new SaaS product, a more mature enterprise sales motion, and recurring revenue before Creative Cloud adopted that model. The move was risky, but Omniture was already a market-leading business with meaningful momentum, giving Adobe a foundation from which to build a multibillion-dollar marketing business.
→ A strategically distant acquisition succeeded because its scale, leadership, and capabilities justified the risk.
After establishing its marketing business, Adobe acquired additional products that broadened the portfolio while using the same enterprise channel. These closer adjacencies let Adobe put more products into an expensive, mature sales force rather than rebuilding distribution for every addition.
→ The company expanded revenue opportunities while reusing a hard-won channel capability.
Common mistakes
Following competitors instead of strategy
Buying something merely because a competitor is interested substitutes reactive behavior for a coherent strategic thesis.
Ignoring the sales motion
A product may look adjacent technologically while requiring an entirely new and difficult channel or customer relationship.
Treating the score as an automatic veto
A distant adjacency can still be worthwhile when the acquired business has sufficient momentum, leadership, and strategic upside.
Is it for you?
Best for
It is best for corporate strategy teams evaluating acquisitions, new products, channels, geographies, or business models.
Not ideal for
It is not ideal for organizations that have not yet established a stable core business or repeatable operating model.
From the transcript
“anytime you change one of those five things you're like a one-step adjacency further from the core and it creates risk”
“It doesn't mean that you don't take you know things that are are multi-step adjacencies because sometimes those are where the biggest opportunities are but…”
“the categorization of what you're going after is driven by what you're trying to accomplish strategically.”
From the episode
Special: An Acquirer’s View into M&A with Taylor Barada, head of Corp Dev at Adobe
Taylor Barada